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TRANSPARENCY AND DISCLOSURES

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GENERAL

 

DiliCapital believes transparency is essential to good business, so we strive at all times to ensure that our employees, project sponsors, and all parties with whom we do business can rely on us to operate responsibly and ethically. That is why we have been working to increase the transparency of our business activities and processes through formal compliance with regulatory guidelines and voluntary initiatives with the public and associates. We firmly believe this commitment is consistent with our values.

 

We have a strong focus on stakeholder relations and communications, with a team of dedicated, experienced professionals in lenders and partners links, as well as regulatory matters, dedicated to effective engagement with our stakeholders.

 

To ensure that our efforts are in the best interest of our business and our stakeholders, we examined our business strategy, expectations, and emerging trends regarding a responsible transaction to define our most material issues.

Contact us for more information.

DISCLOSURES

DiliCapital is a private company and a private issuer. Our investment opportunities are available to accredited individual investors and entities such as private companies, public companies, partnerships, financial institutions, pension funds, governments, trust companies and registered charities, as approved by our legal counsel and investment management firm, Fasken Martineau DuMoulin LLP and Palette Investment Management Inc. See below for definition and certification of "Accredited Investor".

The information on our website is intended solely for the firm's benefit and individuals seeking to be connected regarding our structured financing and project finance advisory services.

 

No information on this site constitutes an offer or solicitation to purchase any investment, solution, or recommendation to buy or sell securities. It is not to be construed as investment advice.

 

Our Company is an asset management company that has retained the service of an investment management Company licensed by the Ontario Securities Commission. We are neither a Mutual Fund, Bank, Broker, Finance Company, nor Financial Adviser; We advise that any contemplated transaction(s) are strictly private and in no way related to the sale of registered public securities.

Our services may not be available in all jurisdictions or to all persons/entities. We select our clients carefully and do not accept all applications. We also advise our clients that all transactions have a risk. All clients should undertake to consult Independent Legal and Accounting Experts before commencing, signing, or committing to any transaction and contract.

All transaction information is strictly private, confidential, and classified and not to be provided to parties not approved in writing by us nor published or referred to in any public forum on the internet or in the media. Disclosing, copying, distribution, reprinting, or reusing the contents or information in the form or on our website is complete and prohibited.

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ACCREDITED INVESTOR CERTIFICATION

Accredited Investor

 

Individual

An individual is considered an “Accredited Investor” if at least one of the following criteria is met.

  • Your net income before taxes was more than $200,000 in each of the two most recent calendar years, and you expect it to be more than $200,000 in the current calendar year.

  • Your net income before taxes combined with your spouse was more than $300,000 in each of the two most recent calendar years, and you expect your combined net income before taxes to be more than $300,000 in the current calendar year.

  • Either alone or with your spouse, you own more than $1 million in cash and securities after subtracting any debt related to the money and securities.

  • You have net assets worth more than $5 million, either alone or with your spouse. (Your net assets are your total assets (including real estate) minus your total debt.)

  • A person or company registered under the securities legislation of a province or territory of Canada as an adviser or dealer.

 

Corporations and Partnerships

 An entity is accredited if it meets any one of the following criteria:

  • Possesses investments of more than $5 million and was NOT formed for the specific purposes of acquiring the investment

  • Equity owners of the entity are accredited, individual investors.

  • A person or company registered under the securities  legislation of a province or territory of Canada as an adviser or dealer.

 

Trusts

A trust is accredited if it meets any one of the following criteria:

  • Possesses investments of more than $5 million and was NOT formed for the specific purpose of acquiring the asset and is directed by a sophisticated person.

  • The trust utilizes a bank, insurance company, registered investment company, business development company or small business investment company as a trustee.

  • The trust is revocable, and grantor(s) are accredited, individual investors.

 Accredited Investor Certification

The following documentation is required to prove that you can be considered an accredited investor.

 

Individuals:

  • Net Worth verification: Submit any combination of bank statements, brokerage statements, other statements of securities holdings, and appraisal reports to assess the value of your assets. 

  • Income-based verification: Tax returns or other government documents can support evidence. 

  • Knowledgeable investor test, a copy of the unexpired securities license suffices.      

 

Business Entities and Trusts

  • Show the $5 million minimum assets by furnishing a bank statement, brokerage statement and/or appraisal reports of real estate or other tangible assets held by the entity. 

  • If a business entity does not meet the minimum assets requirement, then each business entity owner must be individually verified as an accredited investor, in which case the documentation requirements mentioned above for individuals apply. 

  • Similarly, if a trust does not meet the minimum assets threshold, then the trust documents should be submitted to determine if the trust qualifies based on the type of trustee or if the trust is revocable.  Suppose the trust wishes to achieve accreditation under the condition that the trust is revocable. In that case, all trust grantor(s) must be accredited individually, in which case the documentation requirements mentioned above for individuals apply.

 

“Minimum Amount Investment” Exemption

 

The minimum amount investment prospectus exemption allows businesses, Partnerships and Trust to invest provided the purchase price of investment is at least $150,000 and is paid in cash at the time of the purchase.

PALETTE DISCLOSURES

ABOUT PALETTE

Palette is a private company incorporated in the Province of Ontario and registered with the Ontario Securities Commission as a Portfolio Manager, Investment Fund Manager and Exempt Market Dealer.  Palette is also registered in Quebec and Alberta as Exempt Market Dealer. Palette manages funds on behalf of individuals and institutions. 

 

NATURE OF OUR RELATIONSHIP

Palette may act as a client’s exempt market dealer when buying or selling units of a Fund for the client. Palette may also act as a dealer or underwriter for any prospectus-exempt securities.

 

TRADE SUITABILITY

Palette is obligated by law to ensure that a purchase or sale of a security or investment product is suitable for you before your investment. We make this assessment by compiling information from our meetings with you and completing financial and other information in the “know your client’ questionnaire. We will make suitable investment recommendations based on your circumstances, investment objectives, and risk tolerance as disclosed by you.

KNOW YOUR CLIENT'S OBLIGATION

Palette is required to take reasonable steps to:

  1. establish the identity of a client and, if we have any cause for concern, make reasonable inquiries as to the reputation of the client;

  2. establish whether the client is an insider of a reporting issuer or any other issuer whose securities are publicly traded;

  3. ensure that we have sufficient information regarding all of the following to enable us to meet our obligations under NI 31-103:

    • the client’s investment needs and objectives;

    • the client’s financial circumstances;

    • the client’s risk tolerance, and

 

To establish the identity of a client that is a corporation, partnership or trust, Palette must establish the following:

 

  1. the nature of the client’s business;

  2. the identity of any individual who,

    • in the case of a corporation, is a beneficial owner of, or exercises direct or indirect control or direction over, more than 25% of the voting rights attached to the outstanding voting securities of the corporation, or

    • In the case of a partnership or trust, exercises control over the affairs of the partnership or trust.

 

Palette takes reasonable steps to keep the information required under this section current. Securities regulators require us to keep up-to-date information on your personal financial situation, such as:

  • personal income

  • employment information

  • approximate net worth

  • investment experience

  • corporate profile

  • investment objectives and goals

  • risk tolerance

  • financial circumstances

 

DESCRIPTION OF SERVICES OFFERED BY PALETTE

As Exempt Market Dealer, Palette acts as a dealer or underwriter for any prospectus exempt securities.

 

A DESCRIPTION OF THE FEES THAT WILL BE CHARGED

Exempt Market Dealer

Palette earns commissions or finder’s fees on shares purchased by clients.

RISK OF USING BORROWED MONEY (LEVERAGING) TO FINANCE THE PURCHASE OF A SECURITY

Using borrowed money to finance the purchase of securities involves greater risk than a purchase using cash resources only.  If you borrow money to purchase securities, your responsibility to repay the loan and pay interest as required by its terms remains the same even if the value of the securities purchased declines.

 

Funds may be purchased using available cash or a combination of cash and borrowed money.  If cash is used to pay for the security in full, the percentage gain or loss will equal the percentage increase or decrease in the value of the security.  The purchase of a security using borrowed money magnifies the gain or loss on the cash invested.  This effect is called leveraging.  For example, if $100,000 of securities are purchased and paid for with $25,000 from available cash and $75,000 from borrowings, and the value of the securities declines by 10% to $90,000, your equity interest (the difference between the value of the securities and the amount borrowed) has declined by 40%, i.e. from $25,000 to $15,000.

It is apparent that leveraging magnifies gains or losses.  It is important that an investor proposing a leveraged purchase of securities be aware that a leveraged purchase involves greater risk than a purchase using cash resources only.  To what extent a leveraged purchase involves undue risk is a determination to be made on an individual case basis by each purchaser and will vary depending on the purchaser's circumstances and the security purchased.  It is also important that the investor be aware of the terms of a loan secured by securities. 

The lender may require that the amount outstanding on the loan not fall below an agreed percentage of the market value of the securities.  Should this occur, the borrower must pay down the loan or sell some of the securities so as to return the loan to the agreed percentage relationship. In our example above, the lender may require that the loan not exceed 75% of the market value of the securities. On a decline of value of the securities to $90,000, the borrower must reduce the loan to $67,500 (75% of $90,000).  If the borrower does not have cash available, the borrower must sell securities to provide money to reduce the loan.

Money is, of course, also required to pay interest on the loan.  Under these circumstances, investors who leverage their investment are advised to have adequate financial resources available both to pay interest and also to reduce the loan if the borrowing arrangements require such a payment.

 

DISCLOSURE OF CONFLICTS

​Conflict of Interest

Palette has policies and procedures in place to address the handling of conflicts of interest.  A conflict of interest arises where an action or decision by us has the effect of benefiting us at your expense.  In situations where our interest may compete with your interest, your interest is always given priority. 

 

Addressing of Conflicts of Interest

The Firm may adopt one or more of the following measures or procedures when addressing conflicts of interest:

  • Control of information:  preventing or controlling the exchange of information between opposing sides of a conflict of interest, for example, by establishing an ethical wall.

  • Separate supervision:  ensure that different people supervise employees on opposite sides of a conflict of interest.

  • Neutralizing financial incentives:   removing the financial incentive of an employee to favour a particular product or service.

  • Removing inappropriate influence:  preventing one employee from inappropriately influencing another employee where such influence could impair integrity or judgment.

  • Segregation of tasks:  controlling the simultaneous or sequential involvement of employees in separate tasks or services.

 

FAIR AND EQUITABLE ALLOCATION

The principal determination used in allocating investment opportunities amongst discretionary accounts and funds is the suitability of purchase and sale transactions as determined by the unique needs and circumstances of clients as set out in clients’ IPS’s and the Funds’ various mandates.  Palette’s policy is that no single account or fund will receive preference in allocating investment opportunities.

When orders for more than one fund are entered as a combined order and transactions are executed at varying prices, the shares are accumulated in the Palette average price account. Once the order has been completed, an average price is determined, and Palette allocates the securities to accounts and funds at the average price.

When orders for more than one account or fund are entered as a combined order, and less than the total of one order is executed as a block, Palette will generally attempt to make allocation pro rata on the basis of order size.  However, we also take into consideration the return expectations and risk reduction benefits new security brings to the portfolio and may allocate based on that assessment rather than a pro-rata assessment.

Palette will endeavour to ensure that the orders and modification or cancellation of orders are recorded in electronic form or in writing and time-stamped.  Palette will use its best efforts to ensure that orders are processed and executed on a first-in, first-out basis, subject to market conditions and stock exchange procedures.

The foregoing procedures will be revised from time to time in keeping with changes in regulatory requirements and industry practices.

REPORTING COMPLAINTS/DISPUTE RESOLUTION SERVICES

If you have any concerns that your dealings with Palette are not in accordance with securities law or that a staff member is acting illegally or unethically, please let us know.  Please direct any concerns or complaints to Palette President Andrew Cook.  We request the following types of complaints be submitted in writing:

 

Allegations of compliance-related violation or a violation of industry rules, best practices guidelines or securities laws; complaints which involve the Firm’s or a registrant’s sales practices. Please e-mail complaints directly to andrew.cook@paletteinvestments.com or mail to:

 

Mr. Andrew Cook

Palette Investment Management Inc.

19 Glen Castle Street

Toronto, Ontario M4R 1Z5

 

Your complaints will be responded to immediately and resolved in a timely manner.  Where the complaint cannot be resolved to your satisfaction, Palette offers a third party dispute resolution process at no cost to you.